San Jose and the reemergence of the donut city
After many decades of reinvestment and repopulation, some American downtowns are now showing signs of hollowing out again.
- After many decades of reinvestment and repopulation, some American downtowns are now showing signs of hollowing out again.
- The widespread adoption of remote and hybrid work schedules has drained commercial offices and caused tenants to terminate leases.
- Ripple effects include shrinking lunchtime crowds, slumping retail sales and a drop-off of public transit ridership.
Pre- and post-pandemic urbanism
- A donut city is defined by out-migration, with the city center losing residents and businesses to the suburbs.
- This is not a rerun of hollowing out experienced in many U.S. cities in the 1960s.
- Exactly what this collision looks like varies from one municipality to the next, but some broad trends are emerging.
- Since 2020, this demand has been slaked by the federal government’s pandemic relief money, but now these funds are running out.
A growing demand
- According to the U.S. Department of Housing and Urban Development, nationwide homelessness numbers have been trending upward since 2016.
- In 2022, a post-pandemic spike left this number just shy of 600,000 people, up 50,000 in six years.
- The demand for law enforcement is also growing.
- Although crime rates have now abated in most U.S. cities, local governments are dealing with a public perception that their cities are less safe.
Donut amid shimmering silicon
- It is a city that is home to thousands of global technology firms and suffers from vastly inflated housing costs.
- And yet, despite its wealth, it is struggling with the pressures of Donut City 2.0.
- As may seem fitting for the home of Zoom’s headquarters, San Jose has seen some of the lowest rates of return to office working.
Drop-off in investment
- One way is that it makes future investment less likely.
- San Jose’s economic growth hinges on Google’s planned expansion and an in-progress connection to the regional BART transit system.
- Given all that empty office space and large drop-offs in BART ridership, these plans now face a more uncertain future.
- Business taxes represent a relatively small slice – 6%, or $70 million – of its total revenues.
- In 2020, the city was successful in introduced a new property transfer tax to address housing problems, making an additional tax a hard sell.
Multiple stressors
- Budget projections look bleak in many cities, with notable cases including large metros such as Chicago, Houston, San Francisco and New York City.
- In 2022, the U.S. Census Bureau reported that San Jose had lost 42,000 residents, the city’s population declining 4.1% since 2020.
- Unlike 50 years ago, cities are now more entrepreneurial, aggressively competing against each other for residents, businesses and state and federal funds.
- For those cities that lose out, the subsequent struggle for survival could mirror the worst of 20th century urban decline.